Philippines PMI May 2017

Philippines: Manufacturing PMI rebounds in May

June 1, 2017

The Philippines’ manufacturing industry gained momentum in May. The Manufacturing Purchasing Managers’ Index increased from 53.3 in April to a five-month high of 54.3 in May, according to a release provided by Nikkei and IHS Markit. The index thus moved further above the 50-point threshold which separates expansion from contraction in the manufacturing sector.

May’s acceleration came mainly on the back of faster growth in output, new orders and employment. Overall, new orders expanded solidly in May, growing at the fastest pace in three months, in part thanks to product launches and client acquisitions. On the external front, export sales continued to rise, although at a significantly softer pace than total new orders, confirming that domestic demand is the main driver of growth in manufacturing. Strong growth in new orders led to an acceleration in output growth and staff hiring, while backlogs of work, thanks to the additional staff and abundant production capacity, declined for the fifteenth month straight. Regarding prices, the rise in input costs softened but remained robust overall, due to a weaker peso and higher raw material prices, and translated into a smaller hike in output prices.

Bernard Aw, economist at IHS Markit, commented: “Buoyant domestic demand and business optimism augur well for the strong growth momentum to be sustained as we approach the end of the second quarter. […] Business optimism and a healthy sales pipeline hint that the robust hiring pace is likely to continue. Furthermore, ongoing public infrastructure spending and domestic consumption should continue to support manufacturing activity in the coming months.”

FocusEconomics Consensus Forecast panelists see manufacturing rising 5.9% in 2017, which is down 0.5 percentage points from the previous month’s estimate. For 2018, the panel expects manufacturing to increase 5.9%.

Philippine exports contracted in November, after 12 months of expansions, mainly on the back of plummeting demand from Japan and a notable decrease in overseas orders to the United States and China, which more than offset stronger demand from Hong Kong and Singapore.